Seventh Circuit Reverses Summary Judgment on Fair Debt Collection Practices Claim Reasoning Lack of Standing

On August 31, 2021, the Seventh Circuit Court of Appeals reversed a summary judgment decision from the United States District Court for the Northern District of Illinois, and remanded the action with instructions to dismiss for lack of subject matter jurisdiction. See Wadsworth v. Kross, Lieberman & Stone, Inc., No. 19-1400, 2021 WL 3877930 (7th Cir. 2021). The Seventh Circuit reasoned Plaintiff’s lack of Article III standing with respect to her claims brought pursuant to the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § § 1692 et seq.

As background, Plaintiff accepted an offer of employment where she would receive a signing bonus after thirty (30) days of employment, and another bonus after one hundred eighty (180) days of employment. Per the employment agreement, however, Plaintiff agreed to reimburse her employer for the total amount of the bonuses received, in the event she voluntarily ended her employment or was terminated for cause within eighteen (18) months of the second bonus payment. Accordingly, Plaintiff was fired one (1) year after employment.

In response, the employer hired Defendant debt collection agency to collect the bonus payments. In effort to do so, Defendant mailed a collection letter to Plaintiff and called Plaintiff a total of four (4) times. Based on this conduct, Plaintiff filed suit against Defendant in the Northern District of Illinois claiming that Defendant’s letter and phone calls violated the FDCPA. Specifically, Plaintiff alleged Defendant violated § 1692g(a) for failure to provide notice of her statutory rights within five (5) days of the initial contact, and § § 1692d(6) and 1692e(11) for failure to identify itself as a debt collector or that it was attempting to collect a debt during the calls. Defendant argued the FDCPA was inapplicable as the signing bonus was not a debt within the meaning of the FDCPA, and that it was not acting as a debt collector because Plaintiff’s bonus payments were not in default at the time it mailed the letter and made the calls. Both of the parties moved for summary judgment. The District Court found that the signing bonus was a debt, and thus, Defendant was required to comply with the disclosure requirements under the FDCPA. See Wadsworth v. Kross, Lieberman & Stone, Inc., No. 17 C 8167, 2019 WL 8405215 at *2 (N.D. Ill. Feb. 1, 2019). Accordingly, the District Court entered summary judgment for Plaintiff and Defendant appealed.

On appeal, the Seventh Circuit engaged in a very different analysis – focusing solely on whether Plaintiff had standing to sue. The Court drew insight from the Supreme Court’s decision in Spokeo, which requires a Plaintiff to have suffered an injury in fact that is traceable to the alleged conduct of the Defendant to establish standing. See Spokeo, Inc. v. Robins, 136 S.Ct. 1547 (2016). To this end, courts have long held that an injury must be concrete. In the context of the FDCPA, courts have repeatedly recognized that a debtor suffers a concrete injury when a debt collector fails to inform a debtor of his statutory rights, “only if it impairs the debtor’s ability to use that information for a substantive purpose that the statute envisioned.”

Using this analysis, the Seventh Circuit determined that Plaintiff could only incur a concrete injury if Defendant’s failure to provide notice of her statutory rights caused her to suffer a harm identified by the FDCPA – i.e. paying money she did not owe. Because Plaintiff admitted that she had not paid Defendant or the employer the bonus payments, and that she had merely suffered “stress” and “anxiety,” the Court held that Plaintiff had not suffered a concrete injury in fact traceable to Defendant’s alleged violations of the FDCPA. Therefore, the Seventh Circuit reversed the lower court’s summary judgment decision reasoning Plaintiff’s lack of standing, and remanded the action with instructions to dismiss for lack of jurisdiction.

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